The Fed’s ‘Expedited, Closed’ Meeting Is Pure Kabuki Theatre

More like Theatre of the Absurd, will all due respect and apologies to Albert Camu and Samuel Beckett.
The Fed announced a ‘meeting under Expedited Procedures’ that will take place on Monday, November 23. The ‘matter(s) considered’ is a ‘review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks (regional). You can see the notice as posted on the Fed website.
This meeting appears to be much ado about nothing – with all due respect to Shakespeare. Why? The matter to be considered is the rates charged to banks under the Fed’s ‘Primary Credit’ program – LINK. This is commonly, generically referred to as the ‘discount window.’
Historically the discount window was the mechanism used by the Fed to enable member banks to borrow on a short term basis to meet temporary liquidity issues. With the development of financial market technologies and the liberal use of the printing press since 1980, the discount window – i.e. the Primary Credit program – is rarely used. The current rate charged to discount window borrowers is 50 basis points above the Fed Funds rate.

This post was published at Investment Research Dynamics on November 20, 2015.